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Davis v Scottish Re Group Ltd.

Court of Appeals of New York

 October 10, 2017, Argued ; November 20, 2017, Decided

No. 111

Opinion

 [**893]  [*249]  [***448] Feinman, J.

Plaintiff Paul Davis was an owner of ordinary shares in defendant Scottish Re Group Limited (Scottish Re), a Cayman Islands company formerly engaged in the business of reinsurance. He asserted both direct and derivative causes of action against Scottish Re, its indirect wholly-owned operating subsidiary Scottish Re (U.S.), Inc. (SRUS), certain members of the Board of Directors of Scottish Re and SRUS, Massachusetts Mutual Life Insurance Company   (MassMutual) and the private equity firm Cerberus Capital Management, L.P. (Cerberus), and various entities affiliated with MassMutual and Cerberus. Plaintiff alleged that MassMutual and Cerberus, through certain of their affiliates, worked in concert with Scottish Re directors that were beholden to them to implement a series of transactions that enriched themselves, while causing harm to minority shareholders like plaintiff and to Scottish Re. The only claims relevant to this appeal, as limited by the parties' briefs, are plaintiff's [****2]  derivative claims.

Supreme Court dismissed the majority of plaintiff's complaint, including his three derivative causes of action, on [*250]  two grounds. It held that, under Cayman Islands law, plaintiff had not established standing because he did not seek leave of court to commence a derivative action under rule 12A of order 15 of the Cayman Islands Grand Court Rules. In the alternative, Supreme Court held that plaintiff did not have standing to bring his derivative claims under Cayman Islands common law, which applies the test embodied in the 1843 English case, Foss v Harbottle ([1843] 67 Eng Rep 189, 2 Hare 461).

The Appellate Division modified, to allow plaintiff to replead two claims not at issue here, and otherwise affirmed based on plaintiff's noncompliance with rule 12A, holding that the rule applied because it was substantive, rather than procedural.1 It did not reach the question of whether plaintiff had standing under Foss v Harbottle. The Appellate Division granted leave to appeal and certified the following question: "Was the order of this Court, which modified the order of Supreme Court, properly made?"

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30 N.Y.3d 247 *; 88 N.E.3d 892 **; 66 N.Y.S.3d 447 ***; 2017 N.Y. LEXIS 3277 ****; 2017 NY Slip Op 08157

 [1]  Paul Davis, Appellant, v Scottish Re Group Limited et al., Respondents, et al., Defendants.

Prior History: Appeal, by permission of the Appellate Division of the Supreme Court in the First Judicial Department, from an order of that Court, entered March 10, 2016. The Appellate Division order, insofar as appealed from, affirmed so much of an order of the Supreme Court, New York County (O. Peter Sherwood, J.; op 46 Misc 3d 1206[A], 9 NYS3d 592, 2014 NY Slip Op 51898[U] [2014]), as had, to the extent appealed from as limited by the briefs, granted certain defendants' motions to dismiss the seventh, ninth and tenth causes of action for lack of standing. The following question was certified by the Appellate Division: "Was the order of this Court, which modified the order of Supreme Court, properly made?"

Davis v Scottish Re Group Ltd., 138 AD3d 230, 28 NYS3d 18, 2016 N.Y. App. Div. LEXIS 1715, 2016 NY Slip Op 1756 (Mar. 10, 2016), reversed.

Disposition: Order, insofar as appealed from, reversed, with costs, case remitted to the Appellate Division, First Department, for further proceedings in accordance with the opinion herein and certified question answered in the negative.

CORE TERMS

derivative action, courts, derivative claim, shareholder, substantive law, rules of procedure, statute of limitations, cause of action, parties, statute of repose, litigated, accessed, commence, terms

Business & Corporate Law, Actions Against Corporations, Derivative Actions, Procedural Matters, Shareholder Actions, Derivative Actions, Civil Procedure, Federal & State Interrelationships, Choice of Law, Forum & Place, Governments, Legislation, Statute of Repose, Statute of Limitations, Time Limitations, Statutory Remedies & Rights, Types of Statutes